Mueller(paul)co (OTC:MUEL)

Paul Mueller Company (OTC:MUEL) ($78.90;$85.6M market cap), announced Q1 2024 earnings and the board of directors approved an increase to the share repurchase program. 

• Q1 sales of $50.3 million vs $56.3 million
• Q1 EPS of $4.10 vs $3.38 in the prior year
• March 31, 2024 backlog is $95.2 million compared to $122.8 million at March 31, 2023. 

After a few nice quarterly revenue outings, it’s unclear if the weak first quarter sales performance and backlog implies that the company has still not reached a level where it can grow revenues on a consistent basis. This has been the issue challenging valuation expansion. However, the company is now more profitable than it has been in the past due to divesting assets and eliminating its pension obligation from its balance sheet. 

At an EPS run rate of $4.10, MUEL is selling it at P/E of 4.8x.

The company also announced it has increased its tender offer from $10 to $15 million. As of April 26, 2024, MUEL has received tender requests for $5.88 million of shares at $80 a share. 

Paul Mueller Company (OTC:MUEL) ($46.00;$49.9M market cap) operates 3 segments:

• Dairy Farm Equipment – Milk cooling and storage, refrigeration products, and heat recovery equipment. 
• Industrial Equipment – Standard and customized stainless steel and alloy processing and storage tanks, pure water equipment, and heat transfer products. 
• Transportation – Delivery of products and components to customers and field fabrication sites, backhauls of material, and contract carriage. 

****CAUTION: Stock is extremely illiquid****

The stock is back on our radar (after a decade) as financial results are too strong to ignore on the heels of organizational changes announced in the Q1 2023 release.

Q2 2023 results:

• Q2 Sales of $59.9 million vs $45.9 million in the prior year
• Q2 EPS of $4.43 vs a loss of $0.14 in the prior year
• 6 month sales of $116.2 vs $86.7 million in the prior year
• 6 month EPS of $7.81 vs a loss of $1.17 in the prior year

Management Comments:

Most every business segment in the U.S. has an increase led by the pharmaceutical, food and beverage, and component groups. In the Netherlands, revenue is flat for the quarter and down for the six-month and twelve-month periods compared to last year. The shortfall is primarily from milk tanks sold to Great Britain and Ireland, serving beer tanks and the shutdown of DEG.

Net Income is up from the previous year by $5.0 million, $9.8 million and $13.7 million on a three-month, six-month and twelve-month basis. This improvement is partially driven by the US operations where profits were less negatively affected by the change in the LIFO reserve as outlined in footnote F. However, the greater impact has been an increased focus on improving margins. 

The company has a history of reporting lumpy financial results, so we are curious if the changes implemented in Q1 2023 will drive more consistency. 

However, the bigger development is an update on the company’s moves to terminate its two pension liability plans. It appears that the plans were underfunded by an amount of $11.8 million.

We are digging into the company’s filings to determine what type of impact the termination of the will have on the it’s balance sheet and income statement. At the very least, termination will free up annual pension plan contribution requirements that have historically been around $4.2 million.    .

The company has plenty of cash, $38.9 million, on the balance sheet to settle past amounts due to the pension plan. Also, since company press releases offer little color on business plan changes that the company has been implementing, we are going to keep a close eye on the progress of these endeavors.

Shares are trading at a trailing P/E of 3.8 and run-rate P/E of 2.6.

For a recap on what can happen when company’s settle pension plan obligations, please see our recap on Evans & Sutherland Computer Cor (OOTC:ESCC).

Second Quarter 2014 Results

• Net sales of $52.8 million vs $45.6 million in the prior year
• EPS of $2.71 vs $2.59 in the prior year

First Quarter 2014 Results

• Net sales of $46.0 million vs $41.4 million in the prior year
• EPS of $1.01 vs $1.18 in the prior year

Third Quarter 2012 Results

• Reported third quarter 2012 revenues of $46.0 million vs 36.8 million in prior year quarter 
• Reported third quarter 2012 diluted net income per share of $0.70 vs a loss of $0.10 in prior year period.

Reports Second Quarer 2012 Results

• Reported second quarter 2012 revenues of $43.5 million vs 42.6 million in prior year quarter
• Reported second quarter 2012 diluted net income per share of $1.13 vs a loss of $1.00 in prior year period.